We often have clients ask us “What are the pros and cons of getting married again?” At the same time we discuss whether a prenuptial agreement is a good course to follow. As with any estate planning question, the answer varies depending upon each client’s situation. This is not cookie cutter advice that you can get from the internet, your general practitioner, or your financial advisor. The best planning takes into consideration your personal viewpoint on marriage, any court-ordered restrictions you may have in place from a prior settlement agreement, your age, your health and that of your proposed spouse, your expected work life, potential inheritance, whether you have long-term care insurance and your philosophy on leaving money or property to heirs when you are gone, among other things.
Benefits from most recent spouse
Look at the benefits you are receiving from your most recent spouse and how, if at all, those benefits would change if you remarry. For example, if you are nearing your Social Security retirement age and were married more than ten years to your most recent spouse (even if you were divorced), you have an option of claiming on your former spouse’s earnings record for your Social Security amount. If you remarry, that option ends. If you have a low earnings record and money is tight, you may want to find out the difference between your former spouse’s amount and yours.
Do you have a settlement agreement from a prior marriage that provides for any of the following: your ex-spouse pays you a certain amount of money per month; you are the beneficiary of your ex-spouse’s life insurance or retirement accounts; or your ex-spouse provides you with health insurance coverage? If a subsequent marriage would change those or other benefits, you should factor in those changes to your decision.
Prenuptial Agreement (“the prenup”)
The prenup is a written agreement wherein you and your proposed spouse would list the respective rights in property you each bring into the marriage. The prenup would define what the rights would be in any property acquired during the marriage, and the liability for debts incurred during the marriage as well as what the respective rights would be upon death of either party.
Each of you would fully divulge your assets, debts and income and lay out whether there would be any support required by either of you should you be divorced. Often, there is provision in the prenup for one joint account from which to pay for items related to the home or day-to-day living.
The prenup may also delineate who gets the house if it is in one person’s name, whether there is a right to live there for a period of time post death under certain conditions or whether the surviving spouse has a right to purchase the house for a sum certain. This type of provision can also apply to personal belongings or vehicles.
Your prenup could require your spouse to maintain a certain amount of life insurance to provide replacement income should he/she pass before you. Often, acquisition and maintenance of long-term care insurance is negotiated and set forth in the prenup so that the respective assets are protected should one of you need long-term care.
For those who have or will have monthly retirement pensions, the prenup may reference that a certain percentage will go to the spouse, subject to the retirement plan provisions.
If your spouse was to need long-term care in a nursing home or at home and apply for government benefits under the Medicaid program to pay for that care, Pennsylvania would not recognize your prenup. Even if your assets were separately titled from the beginning of your marriage and stayed that way, Pennsylvania would consider all of your assets available to pay for the care of your spouse, with limited exceptions. Your income would remain yours should your spouse go on Medicaid; however, you may lose some or all of your spouse’s income.
Any marriage, first or subsequent, should always be entered into thoughtfully with an eye toward estate planning. As you can see, there are a good many complex issues to consider beyond the balance sheet. Good counsel can help facilitate these conversations.